international_political_economy_perspectives_and_prospectspart_ii

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Review of International Studies (1982), 8, 39-52 Printed in Great Britain
© 1982
International political economy:
perspectives and prospects—Part
R. J. BARRY JONES
The study of international political economy is beset with complexity: the
complexity of the empirical referent and the variety of intellectual perspectives.
The complexity of contemporary international economic relations was discussed
in the first of these two papers. This paper is devoted to a critical review of the
major established perspectives on the global political economy and a discussion of
some of the bases upon which it might be possible to construct a synthetic, and
hopefully more satisfactory, approach.
The contrast between the major schools of thought about the international
political economy is a serious matter for it reflects quite different views about
reality, and has widely divergent implications for policy and conduct. It is both
possible and conventional for analysts to accept one or other of these perspectives,
in a more or less exclusive manner. This makes for clarity and coherence, may
well illuminate something of contemporary international economic reality, but will,
inevitably, remain partial and biased in the face of complexity.
The pitfalls of purity may be avoided by the simultaneous deployment of more
than one perspective. The obvious advantages of such a practice have, however, to
be offset against the possibility of a loss of clarity and cohesion. It is not merely
that the conjunction of contrasting approaches may confuse the reader, but that
the approaches may, themselves, be methodologically and theoretically incom-
patible in their current form.1 Clearly, coherence must suffer if the intrinsically
incompatible are simply lumped together.
If both partiality and possible incoherence are to be avoided, then a demanding
process of theory building may have to be undertaken. It is possible that aspects of
the established perspectives might be accommodated within a new analytical
framework (or, more modestly, the development of existing, but less prominent,
perspectives). The latter part of this paper will consider some of the ideas, and
recent work, that might contribute to just such a new approach.
The major approaches to the international political economy
The mercantilist/'nee-mercantilist persuasion
The mercantilist/neo-mercantilist view of international economic relations, and
conduct, is the longest lived perspective. Its intellectual lynchpin is the power and
security of societies.
Three phases can be discerned in the evolution of the mercantilist/neo-
mercantilist approach: initially, the 'bullionist' period during which attention
focused on the accumulation of wealth, mainly in the form of gold, as the basis of
the military strength of the principalities and embryonic nation-states of late
medieval and early modern Europe; a second phase during which the real basis of
a nation's politico-military strength was seen to lie in its entire economic structure,
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40 International political economy
rather than its stocks of valuable metals; and, finally, the neo-mercantilism of the
contemporary period, which focuses upon the whole gamut of economic structures
and policies. that sustain the economic well-being of societies and their politico-
military power and security.
The view of reality entertained by mercantilists/neo-mercantilists, and their
policy dispositions, flow from the basic concern with power and security. The
political societies into which people are organized are seen to be the basic source
of succour. Many are the causes, both economic and politico-military, of potential
conflict between such societies: territory; resources; wealth; ideology, etc.
Societies that fail to look after their own interests and prepare to meet adverse
developments will suffer. Governments must, therefore, pursue economic policies
that aim at the maximization of military and economic strength and self-
sufficiency.
The mercantilist/neo-mercantilist approach thus envisages the close and
continuing involvement of governments in the economic affairs of their societies.
For the earliest mercantilists, governments were to concentrate on securing a
constant inflow of gold and other precious commodities with which to finance
military capabilities and adventures. Later mercantilists prescribed extensive
governmental direction of domestic economic activity and trade relations. The
objectives, here, were the creation of national economic wealth and strength, the
minimization of dependence for crucial supplies upon foreign suppliers, and, as a
secondary objective, the maximization of foreigners9 dependence upon supplies
from one's own country. Such objectives might be pursued through an elaborate
system of monopoly grants, maintenance of the guild system, and the close
regulation of all aspects of trade.2
Neo-mercantilists argue that contemporary international economic affairs are
still dominated by national self-interest and extensive governmental involvement.
International trade continues to exhibit considerable governmental regulation and
restriction. Trade is also influenced by a host of nominally domestic economic
policies and practices: subsidy policies; support for Research and Development;
investment assistance; regulations on safety and trading practices; taxation
policies; educational provisions and such.3 Governments that either fail to
recognize or respond appropriately to these realities will jeopardize the economic
well-being and general strength of their peoples. In a neo-mercantilist world, the
only responsible policy is that of more vigorous and effective neo-mercantilism,
however subtle or disguised that may be.
The liberal' or neo-classical view of international economics
Many, though not all, of those with, a generally 'liberal9 view of international
economic relations base their approach on neo-classical economic theory. This
views economics, and international economics, as an essentially 6positive-sum9
arena in which all may benefit from suitable arrangements, practices and
developments. Governments should confine themselves to maintaining a
framework within which free-enterprise and competition may flourish: govern-
ments that exceed their 'proper9 role will merely reduce the economic benefits
available to their peoples and to the world in general.
The foundations of neo-classical economic theory are a set of simple, axiomatic
assumptions. In a free market rational consumers will purchase, it is argued, the
most satisfying package of goods and services. On their side, rational producers
will supply the types, and quantities, of goods or services that maximize profits.
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R. J. BARRY JONES 41
Price movements will, eventually, secure the equilibration of supply and demand
across the range of possible goods and services.
In a free international market economic behaviour will be governed by the
answers totwo questions: 'from which source should goods and services be
purchased if satisfaction is to be maximized?9; and, 'what should be produced and
to whom should it be supplied, if the maximum economic return is to be
achieved?9.
International trade is seen to increase the sources of supply of goods and
services, to widen the range of potential purchasers of any country's products and
to extend the possibilities of beneficial specialization of economic activity. At its
simplest, international trade may allow societies to exchange goods and services
that they can only acquire from one another, being unable to produce them
domestically: that is, trade is directed by the principle of'absolute advantage5. The
complexity of the real world, however, also encourages societies to import goods
and services that could well be produced domestically. Here, societies may find it
advantageous to specialize in those areas of production in which they possess a
'comparative advantage9.
'Comparative advantage9 may best be illustrated by the simplified example of
two societies - Country A and Country B - in which people satisfy most of their
needs through personal production. In both societies, however, two sets .of
goods — kitchen equipment and electrical goods — are manufactured by groups of
specialist producers for sale to the rest of the population. One way of costing the
production of these two sets of goods (and of comparing the relative efficiency
with which each is produced within any one of the societies or between the two
societies) is by calculating the man-hours absorbed in the production of one unit of
each type of product. A comparison may thus be made in terms of man-hours per
unit of the overall levels of productive efficiency of Country A and Country B. The
same measure may also be used in an assessment of the relative efficiency with
which kitchen equipment and electrical goods are produced within any one of the
two societies.
In the case in question, it might be that the production of kitchen equipment is
twice as efficient (in terms of man-hours) as the production of electrical goods
within Country A. In Country B, in contrast, the production of kitchen equipment
might be undertaken with the same efficiency as the production of electrical goods.
Here, 'comparative advantage9 will exist and, hence, a basis for specialization of
production and trade. Country A will specialize in producing kitchen equipment
and give up the manufacture of electrical goods, while Country B will concentrate
upon electrical goods and give up producing kitchen equipment. Trade will then be
used by both countries to acquire the goods that each has given up producing.
Such specialization and trade will, occur even if Country A is more efficient (in
terms of man-hours) at producing both kitchen equipment and electrical goods
than Country B. 'Comparative advantage9 concerns the relationship that exists
between the relative efficiency of production of kitchen equipment and electrical
goods within one country and the relative efficiency with which the same goods
can be produced in another society. It thus exists in the case illustrated in Figure 1,
below, even though Country A is more efficient than Country B in producing
kitchen equipment and no less efficient in the production of electrical goods.
Specialization and trade is mutually advantageous for Countries A and B in
such a situation4 because Country A can produce 2 pieces of kitchen equipment
for every 1 electrical product that it gives up producing. However, when it comes
to trade with Country B, Country A may have to exchange considerably less than
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42 International political economy
Figure 1. Efficiencies of production and 'comparative advantage9
Country A Country B
kitchen equipment > electrical goods
relative efficiency of production
(domestically)
kitchen equipment = electrical goods
relative efficiency of production
(domestically)
overall
efficiency
Key to symbols
=equal efficiency of production (in man-hours)
>unequal efficiency of production (in man-hours) with the product to the left of the > sign
being produced more efficiently than that to the right.
2 pieces of kitchen equipment for every 1 electrical product that can be obtained
from Country B. Country B will similarly be sacrificing only 1 piece of kitchen
equipment for every extra electrical product that she is able to produce with the
released labour power. Country B may, however, be able to obtain more than 1
piece of kitchen equipment from Country A for every electrical product that she is
prepared to supply.
The critical point here is that the relative efficiencies with which the two sets of
goods are produced domestically within each society establish the limits of an
exchange ratio for the trade of kitchen equipment and electrical goods between the
two societies. In the case under consideration, the limits of such an exchange ratio
are 1 piece of kitchen equipment for 1 electrical product and 2 pieces of kitchen
equipment for 1 electrical product. Thus, a compromise exchange ratio of 1«5
pieces of kitchen equipment for 1 electrical product would mean that Country A
was making a 'profit9 of -5 of a kitchen product by giving up the domestic
production of • electrical goods, producing extra kitchen goods (being able to
produce 2 pieces of kitchen equipment for every 1 electrical product no longer
produced domestically) and exchanging 1«5 pieces of kitchen equipment for every
1 electrical product from Country B. Country B will similarly gain 1-5 pieces of
kitchen equipment for every 1 electrical product exported to Country A and hence
make a 'profit9 of -5 of a piece of kitchen equipment (having had to give up the
domestic production of only 1 piece of kitchen equipment to be able to produce an
extra 1 electrical product for export). Both societies have thus benefited from
specialization and trade*
In the real world, the variety of goods that are produced and traded, and the
number of countries involved in international trade, reduces the possibility of
direct barter of one product for another. Money is thus used to facilitate complex
patterns of trade and to establish the exchange ratios for a multiplicity of goods
simultaneously. The value of one country's currency, in terms of the rate at which
it can be exchanged for other countries9 currencies, is also the means by which
trade is facilitated between societies of markedly different overall levels of
productive efficiency.
In more recent formulations, the existence of 'comparative advantage9 bet-
ween societies is held to result from varying distributions of 'factors of produc-
tion9 - land, labour, resources, skill, technical know-how.
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The theory of 'comparative advantage9 purports to provide the neo-classical
perspective on international economics with two important theoretical elements: one
positive and one prescriptive. Onthe positive side, it offers an explanation of past
and present patterns of international economic specialization and trade. As free
international markets have come into being, so societies have specialized in those
areas of production in which they have a Comparative advantage9* On the
prescriptive side, the theory of 'comparative advantage9 also heralds the general
benefit that would follow from the further liberalization of international trade, as
the resultant specialization enhanced the optimal use of the world's productive
potential and capacity to satisfy economic desireSo
The 'radical' approach
The 'radical9 approach depicts the contemporary international economic system
as a consequence of western capitalism. Historically, imperialist expansion is seen
to have given western states direct control over most of today's less developed
countries. This control allowed the colonial economies to be transformed.
Diversity and agricultural self-sufficiency were replaced by the specialized
production of the crops and commodities required by the metropolitan countries,5
To 'radicals9, the enforced specialization in primary commodities, and the
associated socio-economic transformation, created those conditions that are now
characteristic of 'underdevelopment9,6 In the contemporary world, it is the over-
specialization in the production of one, or a few, primary products that places the
less developed countries at such a disadvantage in their trade with the advanced
industrial countries (AICs).
Economic over-specialization in most LDCs is also sustained, in 'radicals9 eyes,
by western based multinational corporations. Many local elites within the LDCs
identify their interests with the MNCs and cling to the economic status quo.
MNCs provide the LDCs9 governments with revenue and furnish relatively well
paid occupations for the middle class. Indeed, a lack of general development
within LDCs ensures the maintenance of a substantial labour surplus, from which
can be drawn low cost workers for agriculture, industry and domestic service.
Underdevelopment may thus have much to do with the immediate advantages of
those who belong to the more affluent sectors of society within the LDCs and of
those, within AICs, who benefit from cheap raw materials and inexpensive
foodstuffs.
Many 'radicals9 also adopt a cynical view of western aid, as will be seen in
subsequent sections. They believe too that many international economic
institutions are operated by, or in the interests of, the dominant AICs. The
International Monetary Fund has been a particular source of 'radical9 and LDC
resentment for its tough treatment of those LDCs that have experienced financial
difficulties.
Their view of the character, and structure, of contemporary global economic
relations thus leads 'radicals' to revolutionary proposals. Prominent amongst these
is that of the overthrow of those local elites that identify with the economic status
quo and thereby inhibit genuine development within the LDCs. Simultaneous
revolutionary developments within other LDCs would permit extensive
co-operation and the enhancement of general developmental prospects.
Radical departures within the LDCs might achieve much, but development
would still be hindered by the existence of an unco-operative, and hostile, bloc of
advanced industrial countries. Global development would therefore be consider-
ably assisted if the major capitalist nations also underwent domestic economic,
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44 International political economy
social and political transformation. The hope is that benign socialism within the
AICs would replace international exploitation by genuine assistance and allow
destructive international competition to give way to beneficial complementarity.7
The 'structuralist'perspective on 'North-South'relations
The 'structuralist9 view of international trade disputes the optimism of the liberal9
view by contending that the international economic system places the less
developed countries at a structural disadvantage. The less developed countries, it
is argued, are in a different market situation from that of the advanced industrial
countries. Domestic conditions also vary markedly between the two types of
societies*
In the modern world, the demand for advanced industrial goods seems to be
ever-expanding as real incomes increase globally. In contrast, the demand for the
LDCs9 primary exports is in relative decline as industrial processes become more
efficient in their use of basic materials and energy. Consumers are also reducing
their consumption of basic commodities as greater wealth allows them to switch to
more sophisticated goods and foodstuffs. 'Structuralists9 thus argue that the global
increase of wealth enhances the demand for, and price of, the AICs9 industrial
products while reducing the demand, and price, of LDC primary products:
industrial goods having a high income-elasticity of demand9; primary goods
having a low, or even negative, 'income-elasticity of demand9.
Domestic conditions exacerbate the different international market experiences
of the LDCs and the AICs. Within the AICs, strong trade unions are able to claim
the benefits of increases in productive efficiency. There are, therefore, rarely any
significant reductions in the prices of AIC exports (which are a significant part of
the LDCs' imports). Union strength within the AICs is also one of the factors that
ensures that any increases in the prices paid for imports of primary commodities
from the LDCs are passed back in the form of increased prices for manufactured
goods and advanced services. The general trend of AIC prices is thus ever
upward.
Within the LDCs the situation is quite different. Surplus population contributes
to the general weakness of labour organizations. Increases in efficiency do not,
therefore, lead to automatic increases in wage rates. Indeed, efficiency may
actually produce price reductions. Workers in the LDCs also lack the capacity to
convert increases in the prices that have to be paid for imported goods and
. services into increases in the prices of the goods that they produce. LDC prices
therefore fall and do not reflect an automatic pass-back of import price increases.
Such factors are seen by 'structuralists9 to produce an unbalanced situation in
which there are constant increases in the prices of LDC imports which are not
matched by commensurate increases in the prices of their exports. This amounts
to a secular trend in the 'terms of trade9 for LDCs (unit prices of exports divided
by unit prices of imports) that is to their disadvantage.
Such is the structural disadvantage of the LDCs that any extension of free trade
would, in the 'structuralists9 view? merely worsen their situation. Rather than
more free trade, the requirement is for commodity price stabilization schemes,
largely financed by the AICs, and protection for the LDCs9 infant industries.
Massive aid from the AICs is also necessary for rapid development and to
compensate those LDCs that lack marketable commodities, or for whom
commodity price stabilization schemes produce inadequate, or insufficiently
stable, revenues. Indeed, under realistic expectations it is likely that any
commodity stabilization fund, capable of buying up surplus stocks in good years
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R. J. BARRY JONES 45
and compensating suppliers in bad years, would require periodic re-financing by
the AICs, thus'constituting a substantial, continuing, if indirect, form of aid.8 The
prospects of industrial development within the LDCs would, finally, require
unrestricted access for LDC manufactured goods into the AICs9 markets.,
Unsurprisingly the Western nations have not yet shown marked enthusiasm for
those LDC proposals that have been inspired by 'structuralist5 arguments. The
level of altruism required of the wealthy nations remains unacceptably high for
their own populations. Thus it was that the 'North-South9 Conference in Geneva
deadlocked on proposals for commodity stabilization agreements and funds
during late 1977:9 issues which continue to be matters of controversy and
considerable uncertainty.10
Criticisms
All the major and minor schools of thought thus far outlined illuminate something
of contemporary international economic relations. Each, however, is open to
substantial criticism.
The 'structuralist9 approach can be criticized as somewhat simplistic and
politically naive. The central argument concerning the LDCs9 declining terms of
trade has been widely disputed, with fluctuating commodity prices highlighted as
the real problem for most LDCs.11 Neo-classical economists argue that
interference with the general level of commodity prices would merely reduce the
market for them over the longer term. Marxists and radicals believe that the
'structuralists9 have failed to recognize the basic character and dynamic of world
capitalism and are, therefore, quite naive in expecting substantial improvements
through negotiated reforms in the international economic order.
The major criticism of the mercantilist/neo-mercantilist position is that of the
neo-classical economist who would argue that extensive regulation of economic
activity, and restriction of free trade, necessarily reduces the economic well-being
of all concerned. Only free-trade can ensure the optimal use of the world's
productive resources: restriction of free trade must therefore produce sub-optimal
uses of these resources. The basic mistake, neo-classicists would argue, has been
to view economic affairs as a 'zero-sum9 game (what I gain you loose) rather than
a 'positive-sum9 game (we both gain).
Neo-mercantilist practices might also be self-defeating, for self-interested, or
self-protecting, behaviour could well prompt resentment and retaliation. Few
states are, or can be, entirely self-sufficient economically. Selfish economic policies
might encourage others to retaliate against the mercantilist state's foreign trade.
Worse, resentment abroad might foster politico-military tensions, and threats,
which would undermine basic security. On a global scale, the vigorous pursuit of
neo-mercantilist policies by the economically powerful states might appear as
further evidence of their exploitative world role.
The shortcomings of the neo-classical and radical/marxist perspectives are
more varied and technical. Both approaches constitute general — or
'metatheoretical912- paradigms. Such perspectives offer highly illuminating modes
of analysis but embrace assumptions and derivative propositions that are not fully
tested, and may be inherently untestable. A lack of precise testability allows
dedicated adherents to overlook many of the difficulties that confront their
respective approaches.
'Radical9 (and 'marxist9) approaches thus contain a number of conceptual and
methodological weaknesses. The concept of 'exploitation9, much employed in such
analyses, is somewhat indiscriminate. 'Radical9 descriptions of behaviour are also
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46 International political economy
rather ambivalent., and their prescriptions are lacking in temporal specificity. Thus
'exploitative9 behaviour by capitalists may be self-interested or, where 'false
consciousness9 intervenes, may be ultimately self-destructive. Exploited peoples.,
for their part, may or may not recognize their circumstances. The achievement of
a radical consciousness is thus uncertain, and the precise prediction of
revolutionary developments impossible.
Neo-classical economic theory is, at heart, a deductive system based on a few
initial assumptions about mdividual behaviour. The system of argument exhibits
logical rigour and, therefore, considerable intellectual appeal. However, this
guarantees no more than the axiomatic truth of the derivative conclusions and
propositions. The empirical truth of both the initial assumptions and the derivative
propositions still has to be established independently of the structure of argument.
The initial assumptions of neo-classical theory are explicit simplifications of
reality. The coverage of the theory is also restricted, by intention, to that which is
most amenable to formal analysis and quantification. The success of economic
theory is a direct result of such simplification and restriction. However, this very
simplification and restriction remains controversial and may amount to a serious
distortion of reality.
Charles Kindleberger argues that the prediction of aggregate welfare maxi-
mization within unrestrained free market conditions, by neo-classical theory,
depends on the homogeneity of individuals, an equal distribution of income, and
circumstances in which the welfare of any individual is unaffected by the incomes
and wealth of others. However, in Kindleberger9s view these are "a series of heroic
and unrealistic assumptions'.13 Indeed, the first two assumptions are a clear
violation of common sense and general experience, while the third assumption has
been demolished by much recent work, particularly Fred Hirsch's Social Limits to
Growth}4
If free markets operate under circumstances that do not correspond to
theoretical assumptions, then their consequences will not conform to the
predictions of free market theorists. Worse, the assumption that free markets are
the norm in most areas of economic intercourse may be equally unsound. Fred
Bergsten and John Mathieson express serious doubts about 'the conventional
model, which assumes, among other things, free competition among atomistic
actors' and argue that 'the real world may be dominated instead by oligopolies'.15
Whether economic reality is characterized by oligopolistic conditions, or by free
markets, is a central, though largely unexplored, scientific question16 for would-be
students of the international political economy. If oligopolistic conditions are
prevalent, then the implications are empirically and theoretically profound for, as
Keohane and Nye argue:
A departure from perfect competition always introduces political factors into
the analysis. Once firms can exercise some control over their environments,
problems of bargaining, strategy, influence, and leadership immediately
arise.17
The theory of 'comparative advantage9 suffers from the general weaknesses of
conventional economic theory. Employing simplifying initial assumptions, it offers
a logically consistent argument that actually amounts to little more than the
assertion that successful international competition in any goodsor service follows
from the possession of endowments that permit such competitive production and
trade.
The theory of 'comparative advantage5 is also somewhat ahistorical. It can be
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R. J. BARRY JONES . 47
argued that varying patterns of factor endowments between nations owe as much
to political decision, imperial control, and quasi-imperialism in the past as they do
to the operation of some economic 'invisible hand9. Indeed, a survey of the
economic history of the world during the past century or so indicates much that
favours the former view.18
Towards a new international political economy
The preceding section has surveyed some of the more substantial criticisms that
can be levelled against the major established approaches to the contemporary
international political economy. Judicious selection and re-synthesis may,
however, be possible as each has something valuable to say about certain features
of international economic reality.
Neo-mercantilism highlights many of the practices that governments indisput-
ably adopt in defence of their nations3 well-being and, thereby, demonstrates the
role of politics and of power, both economic and otherwise. The 'structuralist9
perspective indicates the existence of a serious North-South divide and some of the
special difficulties facing the less developed countries. The 'radical'/marxist
approach suggests the ubiquitous influence of power structures of various forms in
economic and political life and provides a methodology that can penetrate beneath
immediate empirical 'realities9.19 The 'liberaP/neo-classical perspective illuminates
the functioning of those competitive markets that do actually exist and indicates
something of the source of the spectacular economic growth experienced during
the late 19th and 20th centuries.
The bases of an effective analysis of the international political economy must,
however, be rooted in a number of assumptions (or empirical observations) that
are incompatible with neo-classical economic theory: first, that the world is
organized into political communities, with governments that, for a number of good
reasons, involve themselves extensively in economic affairs, both domestic and
international;20 secondly, that economic life is as much, if not more, characterized
by various forms of power and their use as by perfect competition; 21 finally, that
economic life manifests inherent uncertainty and chronic disequilibrium in areas of
substance, rather than the neo-classicists9 assumptions of perfect information,
certainty and ultimate general equilibrium.
The central role of 'power9 is the basis of the approach adopted by the
institutionalise school of economists, so admirably introduced in Warren J.
Samuels9 two edited volumes entitled The Economy as a System of Power}2
Tower9 also plays a vital role, along with uncertainty and the illusion of
equilibrium, for the 'post-Keynesian9 (or 'ultra-Keynesian9) school of economists,
as surveyed in Alfred S. Eichner9s A Guide to Post-Keynesian Economics.23
Monopolistic and oligopolistic arrangements are much emphasized by both
schools (in contrast to the neo-classicists9 treatment of such phenomena as
theoretical embarrassments and empirical aberrations). The two schools shade
into one another and offer the promise of a new 'political economy9 which would
be open to insights from radical/marxist approaches, provide substantiation for
some of the 'structuralists9 arguments, and be able to accommodate a moderate
form of neo-mercantilism.
Given an emphasis on 'power9, on the one hand, and a rejection of neo-
classicists9 presumptions of general equilibrium, on the other, the institutionalist/
post-Keynesian approach is less stymied by unrealist a priori assumptions and,
hence, more attuned to the structural features of observable reality. The rejection
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48 International political economy
of presumptions of general equilibrium also relieves the approach of a restriction
to comparative statics.24 The inherent dynamism of economic life can be
accommodated, and economic analysis re-equipped with the capacity to consider
the historical context within which developments take place. Such an approach
thus provides a more comprehensive perspective and a richer analysis of specific
objects of empirical enquiry.
Tower9 is thus returned to its proper role in the study of economic affairs by
those of an 'institutionalistYpost-Keynesian disposition. However, if 'power9 is to
be thus resuscitated, the concept must be handled with care for it is one that has
caused considerable difficulty elsewhere. It has proved all too tempting to use the
term in a loose and indiscriminate manner: sometimes as a synonym for strength
or capability; sometimes as an autonomous quality, at others as a function of a
relationship; sometimes as a fungible resource, other times as a discrete capability;
and, in extreme cases, as a synonym for such notions as 'authority9 and 'influence9.
It is possible to use 'power9 as a generic term for a class of situations and
relationships25 but precision is always necessary in each discrete usage, Klauss
Knorr offers one basic distinction, of considerable importance, in his differen-
tiation between those resources upon which 'power9 might be based -putative
power - and situations in which effective 'power9 has actually been established
over others - actualized power?6 Such a distinction permits an emphasis upon the
psychological element in most relationships in which one agent is able to exert its
will over some other(s), as clearly indicated in Hans Morgenthau9s definition of
power as:
. . . a psychological relation between those who exercise it and those over
whom it is exercised. It gives the former control over certain actions of the
latter through the influence which the former exert over the latters9 minds.27
If putative power can be distinguished from actualized power, and a proper place
accorded to the psychological element in power relationships, then it becomes
possible to make sense of the many situations in which developments do not seem
to accord with the potentialities of the participants. Indeed, the perceptions and
understandings of participants may also have a discernible effect upon
developments within complex, and relatively impersonal, spheres of interaction
such as economic markets (particularly where inadequate information, uncer-
tainty and constant change predominate, as the 'institutionalistsVpost-Keynesians
would contend).
Emphasizing the psychological foundations of many power relationships is not
intended as a challenge to capability based notions of power, rather it seeks to
offer a corrective to unduly simplistic approaches to power in political and
economic affairs. Many real problems of analysis and explanation arise when
reality does not confirm expectations founded upon just such over-simplified
models and approaches. Changes in politics and economics oftenaccentuate
problems, as demonstrated by Keohane and Nye9s invaluable study, Power and
Interdependence.2* The two most prominent modifications of simplistic 'power9
models that are necessary if actual changes are to be comprehended, are greater
discrimination between different spheres of interaction (issue-areas) and, within
each sphere of interaction, the simultaneous analysis of structures of capability
distributions and behavioural patterns (the 'objective9 'power9 structure and,.in
part, the observable pattern of 'power9 relationships). The behavioural patterns
exhibited within any sphere of interaction may reflect, and/or be influenced by,
arrangements that Keohane and Nye term 'regimes9, where regimes are:
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R. J. BARRY JONES 49
' . . . networks of rules, norms, and procedures that regularize- behavior and
control its effects9.29
The concept of 'regime9 takes analysis in a promising direction, for it focuses
attention on the behavioural regularities manifest within any sphere of interna-
tional interaction and, in particular, within facets of the international political
economy. It is, however, a notion that can engender serious misunderstanding.
The first source of potential confusion arises from the legalistic and formalistic
connotations that are usually associated with the term.30 Keohane and Nye are at
pains to indicate that 'regimes9 are behavioural rather than formal and may range
from those that are based upon written agreement through to those that are wholly
informal in character and partial in effect. This, however, does not entirely dispose
of the difficulty and suggests that an alternative term would have been far more
judicious. Indeed, the second shortcoming of the concept of 'regime9 may well
reflect a continuing ambiguity in the thinking of its proponents. Keohane and Nye
identify 'non-regime situations9 as those in which there are no 'agreed9 norms and
procedures, or in which violations of 'rules9 exceed instances of compliance.31
Unfortunately, it is not clear whether the former case includes or excludes
regularities which are not dependent on full consciousness and understanding, let
alone a measure of implicit agreement (as in the impersonal forces making for
regularity in a market). The inclusion of such phenomena clearly disposes of all
formalistic connotations of 'regime9 but furnishes it with a remarkably broad
purview. Exclusion, in contrast, renders the concept more coherent, but removes
an important form of regularity from consideration.
Progress can, however, be made once the terminological quagmire of'regime9 is
transcended. Discrete terms, such as 'agreed rules9, 'shared norms9, 'conventions9
and 'constraints9, can be employed in describing the source and nature of the
regularities exhibited within any sphere of interaction. A less confusing generic
term can be developed for all such behavioural phenomena. The important issue
can then be addressed: that is, the existence of behavioural regularities that do not
necessarily reflect the distribution of pertinent 'objective9 capabilities exactly
within any sphere of interaction. The dynamic relationship between these two
facets of reality can then be examined and, as is shown by Keohane and Nye,
much of the character of interaction with the international political economy, and
many of the bases of change within it, revealed.
The approach advocated by Keohane and Nye permits a distinction between
the 'structural level9 and the 'process level9 of analysis. The former relates to the
distribution of capabilities and denotes the 'long term political and economic
determinants of the system incentives and constraints within which actors
operate9.32 The 'process level9, in contrast, concerns 'allocative or bargaining
behavior within a power structure9.33 This permits a dynamic analysis in which
'objective9 power capabilities, pertinent to a particular sphere of interaction, are
attributed long term primacy but in which shorter term arrangements and
processes can be shown to have discernible effects. Much of conventional
economics can be accommodated at the 'process level9 of analysis without
inhibiting structural analysis (as it does in the hands of neo-classical economists).
In subtle application, such an approach permits an analysis not only of the way in
which structural characteristics exert their long-term influence on behaviour and
outcomes within given spheres of interaction, but also of the ways in which
various processes, and experiences of them, may stimulate attempts to change
practices and develop capabilities,34 thereby stimulating new 'modal tendencies9 in
the behaviour of classes of nation-states.35
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50 International political economy
Many elements can thus be.combined together to form the basis of a promising
approach to the study of the international political economy. The starting point
lies in an acknowledgement of the complexity of contemporary international
reality. The international system is highly differentiated, in more ways than those
apprehended in the neo-classicists9 exclusive focus on specialization of production
and division of labour. There is considerable differentiation in the capabilities of
various societies and the advantages that they glean from prevailing arrangements.
While all societies confront similar problematiques in a 6 self-help9 system, as
highlighted by the neo-mercantilists, and a capitalist world economy may reflect
certain essential dynamics, as suggested by 'radical'/marxist analysts, patterns
may remain quite different in the various areas of international economic
interaction (if at merely an ephemeral level). Structural analysis is essential if
such a reality is to be comprehended adequately.
The contemporary world also exhibits dynamism and inherent uncertainty.
These features, as suggested by institutionalists9 and post-Keynesians alike, form
the bases of an effective analytical approach. It is the way in which individuals,
firms, trade unions and governments respond to dynamism and uncertainty that
constitutes the stuff of reality and of an effective study of international political'
economy. Such responses will be conditioned by historical experiences, expec-
tations and the various capabilities that are available to, or might be created by,
the actors involved. At heart, then, the foundations of a realistic study of the
international political economy are not dissimilar to those of conventional political
analysis. The embellishment required for the study of the international political
economy is the ability to analyse the structural and process-level features of
specific areas of international economic interaction: an ability that may be
enhanced by insights gleaned from "radicaP/marxist, 'structuralist9, neo-
mercantilist, 'institutionalist'/post-Keynesian' and, even, conventional economic
theories.
Conclusion
A new approach to the study of the international political economyis a much
needed, if demanding, development. There are many promising suggestions in the
work of the institutionalists9, post-Keynesians, some analytical marxists, and in
writings like those of Keohane and Nye and Robert Gilpin.36 There are also
innumerable empirical studies of considerable value to the opening of a new
perspective. However, the work of creating a formal neo-Keynesian theory of the
international economic system is not well advanced37 and the integration of other
perspectives only just begun. Difficulties aside, the construction of a new approach
to the international political economy is a pressing task, for much confusion is in
need of dissolution and much silliness requires rapid elimination. It is a matter of
more than academic interest, for the real world continues to manifest disturbing
characteristics and tendencies the amelioration of which requires new ways of
thinking amongst peoples and governments, as a necessary, but sadly not
sufficient, condition.
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R. J. BARRY JONES 51
REFERENCES AND NOTES
1. See the interesting discussion by John Maclean in 'Marxist epistemology, explanations of
Change and the study of international relations' in B. Buzan and R. J. Barry Jones, (eds.),
Change and the Study of International Relations: The Evaded Dimension (London, 1981).
2. See: P. T. Ellsworth, The International Economy (3rd ed.) (New York, 1964), esp. pp. 17-37
and pp. 43-45.
3. See: D. P. Calleo and B. M. Rowland, America and the World Political Economy: Atlantic
Dreams and National Realities (Bloomington, Indiana, 1963).
4. For further reading see such texts at C. P. Kindleberger, International Economics (5th ed.)
(Homewood, Illinois, 1973), esp. Chs. 2 and 3.
5. For a detailed account of 'marxist' views see: Michael Barratt Brown, The Economics of
Imperialism (Harmondsworth, 1974); V. G. Kiernan, Marxism and Imperialism (London,
1974); and R. Owen and B. Sutcliffe, Studies in the Theory of Imperialism (London, 1972).
6. For a vigorous presentation of this view see: Andre Gunder Frank, On Capitalist
Under development (Bombay, 1975).
7. On the 'radical' view see: P. A. Baran, The Political Economy of Growth (Harmondsworth,
1973), esp. Ch. 8.
8. On possible commodity agreements see: C. Kirkpatrick and F. Nixon, The new international
economic order: trade policy for primary commodities', British Journal of International
Studies, vol. 3 (October, 1977), pp. 233-253.
9. See 'Third World Bitter and Collapse of Talks' by Ian Guest, The Guardian, 3 December 1977.
10. See 'Common Fund doubts persist' by Andres Federman, The Guardian, 3 September 1980.
11. See UNCTAD, Handbook of International Trade and Development Statistics (New York,
1972), esp. Table 2.9, p. 42; and Michael Michaely, Concentration in International Trade
(Amsterdam, 1962), esp. p. 130.
12. On the concept and implications of 'metatheory' see: F. Castles, Politics and Social Insight
(London, 1971), esp. pp. 46-47.
13. C. P. Kidleberger, Power and Money: The Politics of International Economics and the
Economics of International Politics (London, 1970), p. 19.
14. Fred Hirsch, Social Limits to Growth (London, 1977), esp. Chs. 3, 4, 5 and 6.
15. C. Fred Bergsten and J. A. Mathieson, 'The Future of the International Economic Order: An
Agenda for Research,' in C. Fred Bergsten, The Future of the International Economic Order:
An Agenda for Research (Lexington, 1973), p. 12.
16. Ibid. p . 12.
17. R. O. Keohane and J. S. Nye, Power and Interdependence: World Politics in Transition
(Boston, 1977), p. 39.
18. See: Carlo M. Cipolla (ed.), The Fontana Economic History of Europe, The Emergence of
Industrial Societies, Vols. 1 and 2 (London, 1973).
19. See Maclean, op. cit.
20. See Kindleberger, Power and Money, op. cit.; Bergsten and Mathieson, op. cit.; Joan E. Spero,
The Politics of International Economic Relations (London, 1977), esp. pp. 31-37 and 64-71;
and Robert Gilpin, US Power and the Multinational Corporation: The Political Economy of
Foreign Direct Investment (London, 1976), esp. p. 102.
21. See Spero, op. cit.; and Klaus Knorr, Power and Wealth: The Political Economy of
International Power (London, 1973), esp. p. 33.
22. Warren J. Samuels, (ed.), The Economy as a System of Power, Vols., 1 and 2 (New Brunswick,
1979); and see also, Warren J. Samuels (ed.), The Methodology of Economic Thought (New
Brunswick, 1980).
23. Alfred S. Eichner (ed.), A Guide to Post-Keynesian Economics (London, 1979); and see, also:
Joan Robinson, Contributions to Modern Economics (Oxford, 1978).
24. See Roger Tooze, 'Economics, International Political Economy and Change in the International
System', in Buzan and Jones, Change and the Study of International Relations, op. cit.
25. See D. Wrong, Power: Its forms, bases and uses (Oxford, 1979), esp. Ch. 1.
26. Knorr, op. cit. pp. 13-14.
27. Hans J. Morgenthau, Politics Among Nations: The Struggle for Power (4th ed.) (New York,
1967), p. 27.
28. Keohane and Nye, op. cit.
29. Ibid. p. 19.
30. See Susan Strange, review article in International Affairs, vol. 51, (April, 1977), pp. 270-273.
31. Keohane and Nye, op. cit. p. 20.
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52 International political economy
32. C. F. Bergsten, R. O. Keohane and J. S. Nye, 'International Economics and International
Politics: a framework for analysis, pp. 3-36 in C. Fred Bergsten and L. B. Krause, World
Politics and International Economics (Washington D.C., 1975), p. 5.
33. Keohane and Nye, op. cit. p. 21.
34. Ibid. p. 51.
35. See Robert Keohane, The Study of Transnational Relations Reconsidered', paper given to the
Annual Conference of the British International Studies Association, University of Warwick,
16-18 December 1976.
36. Keohane and Nye, op. cit., and Gilpin, op. cit.
37. See J. B. Burbidge, The International Dimension', pp. 139-150 in Eichner, op. cit.
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